Withdraw from 401k if >55+, Involuntary Termination
Hello.
If a person is involuntarily terminated from their employer, and they are 55+, can they still take distributions penalty free? Thanks.
Hello.
If a person is involuntarily terminated from their employer, and they are 55+, can they still take distributions penalty free? Thanks.
Permalink Submitted by Alan - IRA critic on Fri, 2019-03-08 16:19
Yes, and the 1099R should be coded with a 2 in Box 7. However, the plan may not allow partial distributions. If the plan requires a lump sum distribution, then the full amount needed to get the employee to age 59.5 could increase their marginal rate in the year of the distribution even though there would be no 10% penalty. Plans with these restrictions often result in a direct rollover to an IRA, and then a 72t plan from the IRA. Usually, a 72t plan is a last resort. Therefore, the person should check with the 401k plan right away to determine what flexible distribution options are provided.